Budget may be safe for now, but weapon makers should worry.

• Author: Erwin, Sandra I.
• Position: DEFENSEWATCH

* If the current discourse over defense spending were a self-help bestseller, it would be titled, "How to Live in Denial About Being Broke."

To their credit, senior Defense Department leaders have called out the obvious: The Pentagon's budget over the past decade has been a runaway gravy train that has to slow down sooner, rather than later, as the nation drowns in debt.

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Defense, however, continues to be spared from the big knives. The 2012 funding request still has the United States spending more on defense than at the height of the Cold War. The proposed $553 billion base budget for 2012--which does not include war costs--would be slightly higher than in 2011. By 2015, the estimated base budget would be $643 billion. The real decline is supposed to happen after 2015.

Just three months ago, the Obama administration's bipartisan deficit-reduction panel unveiled a proposal to tackle the nation's $14 trillion debt. Among the recommendations were cuts of more than $200 billion to the defense budget. But the proposals were rudely ignored.

"Forget the fiscal commission. ... It's irrelevant and passe at this point," says Stan Collender, budget analyst at Qorvis Communications, in Washington, D.C.

Defense will see some nominal reductions, but nothing significant, Collender says. Politicians are calling for Washington to spend more responsibly, but when it comes to defense, it's still business as usual.

"We're not in a period in U.S. history when the United States can gut the military," he says. For the defense industry, nonetheless, the news is bad, because the Pentagon's contracting and hardware-buying powers could diminish considerably. With a flat budget, the Pentagon will have to dip into procurement and contract-services accounts to cover rising personnel and health care costs. Medical coverage for active-duty forces and retirees, which today consumes 9 percent of the defense budget, is growing faster than any other account. Payroll and fringe benefits combined make up 45 percent of the entire Pentagon's budget.

For the defense industry, the 2012 budget is likely to be looked at as a turning point, says Collender.

Until the Pentagon starts taking significant numbers of people off the payroll, it will be nearly impossible to make major cuts to the budget. But as long as unemployment remains at 9 percent, politically, it is a non-starter. Any reductions in defense will come from non-personnel accounts. As a result, this...